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May 1, 2012

Hungary’s consumer appliances market recorded volume and current value
sales declines for the fourth consecutive year in 2011. This negative
trend was a direct consequence of the global economic crisis, which
caused prices and demand in the local property market to fall sharply
and reduced the purchasing power of Hungarian consumers. The impact that
these developments had on demand for consumer appliances was worsened
by the fact that many Hungarians had mortgages and other loans
denominated in Swiss francs and euros. When the economic crisis
significantly weakened the value of the Hungarian forint against both
currencies, these consumers saw their debts increase substantially.
Political instability further undermined consumer confidence during the
middle years of the review period. Nonetheless, thanks to a slightly
improved economic outlook, the rates of decline in total consumer
appliances volume and current value sales in 2011 were significantly
slower than those recorded in 2010, and also well below the average
rates of decline for the entire review period.

During the review period, energy efficiency
became an increasingly important consideration for Hungarians when
buying appliances. As household budgets came under pressure due to the
economic crisis and rising utility bills, consumers began to pay greater
attention to how much water or electricity different appliances used.
This was especially the case with regard to major appliances. As
consumers became better educated about this issue, they proved
increasingly willing to pay higher prices for more energy efficient
products, recognising that they could prove a more economical choice in
the long term. The fact that energy efficient appliances are better for
the environment also made them more attractive to some consumers. For
most Hungarians, however, the eco-friendly properties of energy
efficient appliances were not as important as their economic benefits.
As a result, the issue of environmental protection was more important in
marketing campaigns for individual brands than it was in purchasing
decisions by consumers.

Hypermarkets and internet
retailers make gains in distribution

In terms of retail
distribution, durable goods retailers channels continued to account for
the largest share of total consumer appliances volume sales in 2011.
During the review period, however, the market volume share of durable
goods retailers as a whole declined steadily as other channels gained
ground, most notably hypermarkets. Volume share gains for hypermarkets
were underpinned by the convenience trend and increased price
sensitivity among consumers in the wake of the economic crisis. Together
with improvements in online payment security systems, these factors
also supported more modest volume share gains for the internet retailing
channel. Independent electrical goods retailers were worst affected by
the rise of these channels, with the market volume share of the former
declining dramatically over 2006-2011. Multiple electrical goods
retailers fared considerably better thanks to their ability to offer
wider assortments, more competitive prices and comprehensive after sales
services. These advantages ensured that multiples were able to join
hypermarkets chains and internet retailers in stealing volume shares
from independent electrical goods retailers.